Repurchase Guarantee

[lolachampcar]

I'm scratching my head a bit trying to understand exactly who the repurchase guarantee benefits. It is offered only to those that finance. Are those that finance a special class deserving of repurchase protection? Did those that shelled out $100K not take on more Tesla risk? Why are those that lay that risk off on a third party the ones deserving of the guarantee?

The answer would seem to be that the guarantee was designed not for the customer but to meet a Tesla goal. That would be a reasonable thing for a company to do. My question to those with a more financial mind/skill set is exactly what is this guarantee designed to do and who is the audience?

Is all of this an elaborate way to get the payment down to the magical $500 per month level by extending the term, increasing the end of term valuation and getting potential customers to truly consider the reduction in fuel bills (needed to get to that $500 per month payment level)?

 

[Trnsl8r]

Speculating, but I think it has more to do with satisfying those that are looking to lease. Without a lease option, they can point to this clause in the financing agreement and say that it has everything you want in a lease, just works differently.

 

[metafor]

Ya, it's only available for those who take the Tesla provided loan program -- which generally have a higher interest rate than traditional loans. Like most leases, it'll end up costing more at the end to own the car than those paying outright.

Also keep in mind that the buyback guarantee doesn't just help those who participate in the program. The market value of the car will very much be affected by the buyback guarantee as many people will look to it to determine fair market price.

 

[joshuaeven]

+1 metafor. This 'floor' on the value of the car is just protection. IMHO, the value of the 3 year old MS in good shape will be above the floor.

 

[brianman]

Like most leases, it'll end up costing more at the end to own the car than those paying outright.

Depending on your investment productivity, this isn't strictly true.

For example, you're often better off getting a home mortgage (and investing at a higher rate of return) than buying a house outright. And that's even without the tax implications, or the "creative" government activity as of late with home mortgages.

 

[LagunaDallas]

I think the most fair repurchase guarantee would be to ALL Tesla owners, regardless of cash vs. finance (and who financed it), when trading their 2012/2013 Model S toward the next generation car. I've had 31 really fantastic cars, and I wouldn't trade my MS for any of them. What I would trade it for is the next version which will likely have improved battery life and more features (parking sensors, cooled seats, and blind spot monitoring come to mind) as long as it still has the attractive styling and high-end finish-out of a 'luxury' category car.

We as owners would get a pre-determined trade-in price (hopefully very fair) based on a % of original MSRP. Tesla as a company benefits greatly, as they not only sell us new $80-100K cars and maintain us as loyal customers, but they also get a lot of nice 2012/2013 cars back to sell to eager buyers who want a Model S at a lower price point. Many of those used Model S buyers will go on to be repeat Tesla buyers and move into the new product as their incomes and needs change over time. I started at 16 with a used 1987 BMW 325 with 109,000 miles for $7200, and 20 years later I've purchased 9 of their cars (about $500,000 worth). Take care of current owners and keep the innovative products coming, and you have customers for life. Limiting a guarantee only to those who finance through a Tesla-affiliated big bank --- organizations I try to avoid on principle --- is short-sighted and tacky.

 

[lolachampcar]

the down side to Tesla's approach is that MS is overbuilt (judging by what I have seen of the suspension) and does not have the standard wear issues associated with ICE. It does have battery degradation which will be a problem on resale. Anyway, an actively managed CPO program will shake loose 3-6 year cars that may not otherwise come on the market. I agree that Tesla should actively work to capture this market as it would give them more control over residual value. However, the no dealer model makes it harder to have a pre-owned MS lot right next to your new inventory.

 

[bonnie]

I'm scratching my head a bit trying to understand exactly who the repurchase guarantee benefits. It is offered only to those that finance. Are those that finance a special class deserving of repurchase protection? Did those that shelled out $100K not take on more Tesla risk? Why are those that lay that risk off on a third party the ones deserving of the guarantee?

The answer would seem to be that the guarantee was designed not for the customer but to meet a Tesla goal. That would be a reasonable thing for a company to do. My question to those with a more financial mind/skill set is exactly what is this guarantee designed to do and who is the audience?

Is all of this an elaborate way to get the payment down to the magical $500 per month level by extending the term, increasing the end of term valuation and getting potential customers to truly consider the reduction in fuel bills (needed to get to that $500 per month payment level)?

It's always about motivation, of course. What would you believe the rationale for this to be if the motivation was to increase overall adoption of EVs?

 

[jerry33]

It's always about motivation, of course. What would you believe the rationale for this to be if the motivation was to increase overall adoption of EVs?

1. Provide lower cost Teslas while waiting for the Gen III to come out, which will get EVs in the hands of more drivers.

2. Happy Tesla owners that talk up the car (and the better experience that EVs give).